Customers expect retailers and brands to adapt to their evolving shopping behaviour. Chloe Rigby takes a look at how the landscape is changing.
Making a purchase is becoming simpler than ever, thanks to the fast growth and evolution of mobile technology. Customers can now browse, buy and pay with a few clicks, while improved and more secure payment methods such as Apple Pay, digital wallets and one-click ordering, mean that more are willing to do so, often buying higher value items on the move.
Smartphones continue to drive retail growth: IMRG figures suggest that mobile sales grew by 38.5% in February 2018, while overall online sales grew by 13.1%.
The UK’s Office for National Statistics found shoppers spent 3.9% across all retail sales channels that month, buying 1.5% more goods. The pivotal role of mobile in this is unmistakable and yet, despite the convenience of the phone as a shopping tool, mobile alone is not enough for customers who want to be able to choose how they buy according to what is easier and more convenient for them at any given moment.
British Retail Consortium (BRC) figures underline the point that while retail sales are moving steadily onto online channels that include mobile, most retail transactions still take place in shops. In March 2018, the BRC-KPMG Retail Sales Index estimated that 22% of sales were online – up from 20.6% the previous year.
That leaves 78% of sales that are very firmly offline. Nonetheless, while the general trend remains of a gradual shift online – with mobile claiming a growing share of that business – some sectors are seeing their business move faster. ONS figures suggest that in March 2018, department stores saw online sales grow by 33%, accounting for 17.1% of all sales in the category. This is well ahead of grocery, where 5.5% of all retail sales took place online and the rest in the store.
It’s in response to such long-term trends that retailers continue to reshape the way they sell. For several years now, multichannel retailers have noted that shoppers who buy via more than one shopping channel spend more overall.
Both they and those that sell purely online are seeing mobile come to account for a greater share of their business. Multichannel retailer Shop Direct says 69% of its sales were made via mobile devices in its latest financial year, with smartphones accounting for 53% of total sales.
Brand Alley UK chairman Bruce MacInnes says that about 85% of its traffic is via mobile, but that Brand Alley shoppers browse even more via tablet computers and their smartphones once they’re home at night. Around 70% of its sales are via the mobile channel.
Retailers can see from such figures that people still like to go to shops. The challenge now lies in giving shoppers good reasons to get off the sofa and visit actual stores.
That’s a challenge that many first answered through offering cross-channel services such as click and collect and in-store returns of online orders, alongside mobile apps that bridge the gap between online and the store by giving customers the power to check that the item they want, in the size and colour they desire, will be in the store when they visit.
Shopping centre developer and operator Hammerson has set out its vision of how the retail world is developing under the influence of digital shopping. Its analysis, set out in its 2017 full-year results, suggests that ongoing structural change in retail means retailers – and brands too – now need different kinds of store space that are aligned to the needs of consumers in a multichannel world. The analysis notes that the store remains “the cornerstone” of retail journeys, where retailers showcase products, provide service and fulfil click and collect orders.
Against this context, it sees growing demand from retailers for stores in large sites that attract higher visitor numbers and where consumers visit clusters of stores. At the same time, consumer brands are opening their own stores where they can “directly control the brand experience with their end customers”. As a result, there’s growing competition for space in premium destinations.
“Not all retail is equal and not all locations are well placed to support the future needs of brands,” said chief executive David Atkins. Hammerson summarises its approach, in its full-year results, like this: “We own, operate and develop retail and leisure locations where more happens, that interact seamlessly with digital and bring together the
very best brands.”
Leading IRUK Top500 retailers are also finding compelling reasons for shoppers reasons to visit their stores. Given that ONS figures suggest department stores are seeing their business move online faster, it’s logical that this sector should be at the forefront.
When John Lewis, a Leading retailer in IRUK Top500 research, recently opened its fiftieth shop at Westfield London, its managing director Paula Nickolds explained its current thinking on what the department store now does, and on how it “can be a place in which you can shop, do and learn in a way you haven’t been able to before.”
The store contains the retailer’s first ‘discovery room’ where customers can learn new skills in areas ranging from how to light a room or hang a picture, to how to make a house a smart home. There’s an experience desk and lounge, where partners provide ‘concierge style’ services, offering a booking service for in-store events, consultations and restaurants.
There’s also a new style studio, staffed by personal stylists. The discovery room doubles as a showroom, showcasing smart home technology in a setting where shoppers can learn how to control it. The emphasis is firmly on service, with staff trained by the National Theatre to “engage customers and provide outstanding customer service”, and stylists trained at the London College of Style.
Nickolds said: “This shop offers customers something different. You can get style advice for yourself or your home, learn a new skill, play with the latest smart home technology and so much more. It’s also a place where we can build a far more personal relationship with our customers, bringing together the very best of our service offer and our outstanding partners.”
In its stores, John Lewis also gives space to online brands such as Boden and Hush that have few, if any, stores of their own.
Similarly, rival department store Debenhams has given space to online furniture brand Swoon Editions in its own Westfield London store. This, said chief executive Sergio Bucher when he announced the move, would reinforce its position “as a major player in the UK homeware and furniture market.”
Swoon Editions’ chief customer officer, Nicki Lynch, said the move met demand from its customers. “Our home-obsessed customers are increasingly requesting that they want to see our furniture in real life,” she said. “In an online-only world, it is harder to bring people into your brand in the same way you can with a physical store.” She added that its Debenhams partnership would, “complement our own temporary showroom that pop-up regularly across the UK, and give us a permanent space for customers to be able to experience our furniture.”
Such moves at the department store sit alongside a ‘social shopping’ strategy that puts mobile to work as a way for customers to negotiate and interact with the store. Debenhams’ own research suggests that about 40% of its customers shop with family or friends and that when they do so, they spend more money.
Ross Clemmow, managing director, retail, digital, food and events, told InternetRetailing Magazine that shoppers who visit in social groups spend up to 80% more and want different things. But encouraging them to visit a store requires something different. “The differentiator is about creating retail environments with the right mix of product, experience and food and drink,” said Clemmow. Currently, Debenhams makes around 8% of its revenue from food and drink, although it aims to lift that to 15% or more.
Debenhams’ strategy is building on some established multichannel services. Its Click, Try and Buy service, piloted in Stevenage earlier this year, enables customers to book a changing room to try on an online order, or to talk to a personal shopper who can have accessories ready for the shopper to look at when they try on their online purchases. If they don’t like any items, they can return them straight away, enabling an instant refund and letting Debenhams get items back on sale quickly.
“It’s all about best use of time,” says Clemmow, along with the right combination of product, service and experience. “If we do well, the customer is happy too.” Since this strategy depends on mobile web being available on the move, even where an internet connection may be patchy, Debenhams has invested in progressive web app (PWA) technology to ensure that its mobile web remains available throughout its stores.
Others are putting mobile at the heart of their strategies through apps that aim to remove friction from the customer experience. Tesco is among the supermarkets that have enabled shoppers to pay in-store using their own mobile phone. In 2017/18 full-year results, it said its Pay+ app, which enables easy in-store payment and Clubcard point collection, had been downloaded close to half a million times. The Co-op expects to roll out a scheme this year that enables shoppers to pay in the aisle using their smartphone.
Customers walk around the shop, scanning items on the dedicated app as they add them to their baskets and, at the end of their shop, pay for them through a single click. When the technology trial was first unveiled in March 2018, Matthew Speight, director of retail support at the Co-op, said: “It is a challenging marketplace for retailers and the Co-op is responding positively.
Our ambition is to harness technology to deliver the shopping experience that our diverse customer base requires – when, where and how they need it. It is all about consumer choices and convenience.” He added: “We recognise there are many communities where customers pop into their local Co-op and enjoy a friendly chat – it is all part of the service. Whereas for others, perhaps with a train to catch or on a school run, every second can count as consumers seek increased convenience.”
In the future, multichannel retailers may incorporate new shopping channels that emerge as highly convenient for customers. At the cutting-edge, Tesco, Amazon and Ocado are among the retailers already using voice commerce, enabling customers to update their shopping lists via voice assistants such as Alexa and Google Home.
Amazon is behind early iterations of the Internet of Things, through the Dash Replenishment Service that enables smart devices such as printers, washing machines and even water filters to order their own refills. (Read more about strategies for IoT in our Emerging Practice feature on p29) When these technologies – and the devices that support them – become important to their customers, retailers will have to start investing in them.
Speaking at IRX 2017, Paul Wilkinson, head of technology research and open innovation at Tesco Labs, said that voice commerce lent itself particularly well to grocery shopping, enabling shoppers, for example, to buy last-minute recipe ingredients and have them delivered within an hour where that service is available.
Children, he said, who were growing up in homes with voice commerce, would simply expect such services to be available. “We think this will be a massive part of the future of shopping,” he said. “The technology curve is rampant and if you don’t get onto this now, you’ll be left behind.” But while this was “particularly convenient” for grocery shoppers, it might not as yet lend itself so well for customers in search of a new dress.
These new technologies bring with them specific technical challenges to overcome. In voice commerce, for example, there’s the question of delivering frictionless search.
Since there is no interface to show search results, how does the assistant know exactly what product has been ordered? At Tesco, says Wilkinson, the answer lay in personalised search: when milk is ordered, the system makes a call on what product is intended, based on previous purchases.
That becomes more challenging when a shoppers doesn’t always buy from the same retailer. But despite the challenges, says Wilkinson, the ease of speaking a few words to have an item added to an online basket and subsequently delivered, cannot be ignored.
This is just one of the challenges that inevitably lie ahead and in a cross-channel future. Nonetheless, this is clearly change that is coming. Leading IRUK Top500 retailers are working out how exactly they will negotiate this change but it’s already clear that formulating a roadmap now is an imperative for retailers of all sizes.